Adverse selection and M&A design: The roles of alliances and IPOs
AbstractThis paper investigates strategic alliances and initial public offerings (IPOs) as factors that potentially mitigate the risk of adverse selection in acquisitions. It is hypothesized that prior alliances between acquirers and targets as well as IPOs undertaken by targets reduce adverse selection in M&A. Examining the consideration used in M&A transactions to reflect the allocation of overpayment risk, we find that targets' prior alliances with acquirers and targets' IPOs reduce the likelihood of using stock, or the amount of stock used, to finance acquisitions. We also present evidence that alliances and IPOs substitute for one another.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 66 (2008)
Issue (Month): 2 (May)
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Web page: http://www.elsevier.com/locate/jebo
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- Woltering-Lamers, Philipp, 2011. "Die sequenzielle Organisationswahl: Kooperationen als Vorstufe von Akquisitionen," Arbeitspapiere 122, Westfälsche Wilhelms-Universität Münster (WWU), Institut für Genossenschaftswesen.
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"Whole versus Shared Ownership of Foreign Affiliates,"
Kiel Working Papers
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- Stähler, Frank & Ryan, Michael & Raff, Horst, 2007. "Whole versus Shared Ownership of Foreign Affiliates," Economics Working Papers 2007,18, Christian-Albrechts-University of Kiel, Department of Economics.
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